The Plan to Save Europe

French President Emmanuel Macron (L) and German Chancellor Angela Merkel attend a news conference following talks on European Union integration, defence and migration at the Elysee Palace in Paris, France August 28, 2017. REUTERS/Charles Platiau

In a long speech on September 23, Emmanuel Macron, the president of France, laid out an ambitious vision for a more flexible, secure European Union. Despite his efforts to couch his address as non-confrontational (“I have no red lines, only horizons”), the timing of the address was conspicuous, if not a little aggressive. Angela Merkel had just secured a fourth term as German chancellor, and Macron’s real audience seemed to be the parties in the Bundestag with whom she now seeks to build a coalition, and find common ground with on divisive issues of European integration.

In fact, even before Macron’s victory, he was pitching his ideas to Berlin: for reformed eurozone governance, and a “multi-speed EU,” one in which several core countries, starting with France and Germany, would integrate further in various policy areas, like issuing common bonds or leading military operations, while others would be loosely associated with the bloc. Macron knows that, in recent years, the EU has produced far too many short-term fixes to its structural challenges, like weak economic growth, an inability to protect its external borders, and the rise of antidemocratic populism. “For Europe we need a vision and a screwdriver,” he told an audience at Humboldt University back in January. “Unfortunately, we currently have a lot of screwdrivers but we are still lacking a vision.” Over the last years, however, Merkel’s EU policy has echoed ex-chancellor Helmut Schmidt’s advice: “If you have visions, go see a doctor.”

During her 12 years as chancellor, Merkel—known in equal measure for her prudence at home and reluctance to lead Europe—has listened to three successive French presidents lecture about the future of the EU. Like Macron, they all sought further economic integration and European strategic autonomy on defense, but never said how they would achieve this dream. In the end, none delivered. But Macron hopes his reform agenda and plan to reduce deficits, a longstanding German demand, will grant him a more attentive ear in Berlin. (The day after his speech, Merkel complimented his “European passion,” but cautioned that details still had to be discussed.)

Macron has issued not so much a challenge to Merkel, but a call to embrace the moment. United, they can rebut and reject the populists while answering the problems that they promise to fix. But the French can’t do it alone—they need Merkel to step up, even if that goes against her nature and leadership style. Macron won’t get far with his shiny ideas about the EU without her by his side.

Despite the seemingly grim circumstances of the moment, never under Merkel’s chancellorship have conditions been so ripe for EU reform. Eurozone unemployment has dropped to 9.1 percent, the lowest rate in nine years. The refugee crisis isn’t over, but a dramatic decrease in arrivals has relieved some of the pressure. With Macron’s election, Germany’s key partner avoided a populist outcome that may well have ushered the end of Europe as we know it. Commentators have noted the dramatic entrance of far right anti-refugee Alternative for Germany party into the Bundestag in the September election. But Merkel was reelected with levels of support similar to her 2005 and 2009 bids. She remains Germany’s clear leader.

It is no time for triumphalism, of course. Many of the shortcomings that led to the EU’s myriad crises, from inadequate resources to weak border control, to a poorly integrated eurozone, remain. Instability looms on Europe’s southern periphery and Russian revisionism threatens the east. Populist forces still challenge European countries, as Hungary and Poland slide through illiberalism. Macron wants to show that EU leaders can capture some of the populists’ appeal by demonstrating to citizens that European cooperation is necessary to protect them from terrorism and against the pitfalls of globalization, while confronting Warsaw and Budapest.

Above all, the eurozone—“flawed at birth” as economist Joseph Stiglitz put it—still lacks the institutions and common fiscal policies that could make it a truly functional monetary zone, able to ward off future crisis. For a common currency to function in an area as diverse as the EU, it needs instruments to ensure transfers between states, like the United States has. Policymakers initially hoped the euro would lead to economic convergence between EU states. Instead, while this did drive down interest rates for everyone, it also fueled asset bubbles in countries like Spain and Ireland. Since these countries couldn’t devalue their currencies to remove some of the pressure, and they found no support from Brussels, they turned to austerity.

Recent years have brought temporary solutions and belated emergency measures like cutting interest rates or renegotiating Greece’s debt. Three long-terms fixes that Macron supports keep circulating: creating a eurozone budget, appointing a European finance minister, and establishing a European Monetary Fund. But Germans have been wary of such attempts, arguing they would encourage fiscally irresponsible behavior—there is a real risk that they will support reforms in name only.Merkel seems to favor a small monetary fund to support structural reform in eurozone countries. But this is bad economics and bad politics: austerity measures have made the crisis longer and fueled anti-European populism.

Macron no doubt would have preferred another “grand coalition” government in the Bundestag between Merkel’s Christian Democratic Union of Germany-Christian Social Union bloc (CDU-CSU) and the Social Democrats. The latter embraced his proposals to reform the EU from the beginning, but suffered their worst election result since World War II. In the wake of the election, Merkel now seeks a so-called “Jamaica” coalition with the “yellow” Free Democrats (FDP), her own “black” CDU-CSU, and the Green Party. This means that Macron is likely to face an FDP party that shares the CDU-CSU’s fiscal conservatism and is dead set against eurozone financial transfers that would reward supposedly bad fiscal actors like Greece or Italy. His focus on border security and counter-terrorism measures, however, have broad appeal among Germany’s liberals and conservatives alike, while his ideas for investing in the green economy went down well with the Greens. So far, all German parties have felt compelled to respond to his proposals. Even FDP’s leader, veering away from some of his campaign rhetoric, called Macron a “godsend.”

Of course: Macron’s attempts to influence coalition negotiations in Germany can only go so far. If Merkel is unwilling to make EU reform a priority, his efforts to effectively “re-launch” the bloc will be foiled.

Merkel certainly does not see herself as the “next leader of the free world,” as some were quick to proclaim after Donald Trump’s victory in the United States. She is no visionary. The truth is, Germany’s rise to power in Europe was a function of its neighbors’ weakness: of Italy’s sputtering economy, France’s weak leadership, and Britain’s all-consuming Brexit gamble. Merkel has often found herself in the lonely role of crisis manager, patching things up in the face of considerable pressure. She is the chancellor of the eurocrisis, the refugee crisis, the Ukraine crisis, and the age of Brexit. Often, she’s merely kicked the can down the road instead of confronting Europe’s deeper woes.

During the eurocrisis, Merkel, alongside Wolfgang Schäuble, her finance minister, pushed a course of strict fiscal rectitude, forcing austerity on southern European member-states. It took the European Central Bank to break with German orthodoxy, with ECB Chairman Draghi promising to do “whatever it takes” to save the euro. Draghi and the ECB implicitly guaranteed to bail out southern European countries in debt as a lender of last resort, which quickly calmed the financial markets. But while this abetted the crisis, it did not address the deeper structural flaws of the eurozone.

Later, when Merkel took the lead on the refugee crisis, the rest of Europe did not follow. Germans felt abandoned by their fellow Europeans, while those in central and eastern Europe felt that Berlin pushed ahead without consulting them. A controversial deal with Turkey brought down numbers of arrivals, but has not solved the crisis.

To be fair, exercising political leadership in Europe is awkward for any German chancellor. “Germany never asked to be Europe’s indispensable nation. Circumstances forced it in into that role,” then-German foreign minister Frank-Walter Steinmeier wrote in 2016. Radek Sikorski, Poland’s foreign minister, could famously lament that he feared “German power less than German inaction” but Germans never have to wait long for unsavory Nazi comparisons whenever other European countries disagree with their initiatives. Leadership that developed partly by default, partly in response to the expectations of others, is difficult to sustain against such criticism. Macron’s task will be to alleviate some of the pressure on Merkel, even if that means edging into her backyard.

Circumstances beyond the EU make it all the more necessary to bolster a more resilient Europe. Germany’s decades-long attempt to keep a balanced relationship with Russia, Ostpolitik, has hit a wall with Moscow’s invasion of Ukraine. Russia’s aggressive revision of the European security architecture is throwing the rules-based order that Germany relies on into question. President Trump’s criticism of the EU, and more precisely of Germany on trade, refugees, or defense spending, provide another incentive for Europeans to get their act together. Merkel herself said, “The era in which we could fully rely on others is over to some extent.” And yet, Europe is still a military lightweight, hobbled in part by Germany’s under-investment in defense. While Merkel took the lead in maintaining unity on sanctions against Russia after its annexation of Crimea, she has not prevented the development of the Nord Steam II pipeline that increases eastern Europe’s energy dependence on Russia.

As Merkel embarks on what is likely her final term, her thoughts will no doubt turn to how her contributions to the stability of the EU will be remembered. (It was her mentor, Helmut Kohl, who led German reunification, and paved the way way for the euro with the Maastricht Treaty.) Over the next four years, she could respond to Macron’s speech by laying out her own ideas for the continent, confronting the differences between Berlin and Paris head on, rather than smoothing them over and building more European half measures. She could reach out to other European countries, build coalitions in the east and the south, and deploy her diplomatic skills to repair relationships damaged during the refugee and the euro crisis.

Merkel does not do grandeur. Sweeping proclamations are not her style. But the time to go bold—to transform from crisis manager to stateswoman—is now. It matters not just for her legacy, but for the future of Europe.

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